US moves ahead with tariffs on US$16bn of Chinese imports

August 8th 2018 | Multiple countries | Food and drink

Event

On August 7th the US Trade Representative (USTR) announced that it had finalised tariffs of 25% on a list of Chinese merchandise imports worth US$16bn (at 2017 values), which will take effect on August 23rd.

Analysis

The measures concluded a two-step tariff action against China, targeting imports from the country worth around US$50bn. The first round of measures, which put tariffs of 25% on US$34bn worth of goods, took effect on July 7th. The USTR announced in mid-June that proposed tariffs covering the remaining goods would be open to public comment until July 31st, which prompted lobbying actions by US firms seeking to insulate themselves from tariff disruptions.

In the end, the finalised USTR list exempted only five product categories—including alginic acid, floating docks and transport containers—worth US$434m, according to calculations from the Peterson Institute of International Economics. Products that were not exempted, and on which tariffs will be imposed, include major goods embedded within US global supply chains, such as semiconductors and integrated circuits.

China's Ministry of Commerce has stated that it will implement retaliatory tariffs of 25% on US imports worth US$16bn on the same day as the corresponding US tariffs. It earlier introduced tariffs across US$34bn of US imports the day after the US launched its earlier tariff actions. These developments come shortly after China announced tariffs of up to 25% on an additional US$60bn of US imports, in response to US threats to levy 25% tariffs on US$200bn of Chinese imports.

That threatened action is open to public comment until September 5th, although corporate lobbying efforts have done little to derail the US administration's trade agenda towards China thus far. The fact that tariff threats continue to escalate, with little sign of US-China trade negotiations restarting before the September deadline, indicates that US adoption of tariffs on the majority—if not all—of the targeted US$200bn in Chinese imports is likely. This in turn will prompt China to implement its retaliatory tariffs, which may again lead to more tariff threats from the US president, Donald Trump. While still outside our core forecast, there is an increasing risk that US tariffs will be extended across all Chinese imports.

Impact on the forecast

We maintain our forecast that the US will adopt tariffs on a majority of the planned US$200bn in Chinese imports, but that bilateral tariff actions will not escalate further.